Skype Goes Mobile... Sort Of

By Carlo Longino

Voice over IP telephony provider Skype has developed a large and fanatical following, attracted by its ease of use and call quality. The free calls don't hurt, either — leading to plenty of questions along the lines of: "When will I be able to use Skype on my cell phone?" Which really translates to: "I want free calls on my cell phone." Add in the emergence of mobile handsets with Wi-Fi connections, and there is a growing clamor for Skype-like cheap rates on mobile phones.

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There are already some solutions for the impatient, including Skype Wi-Fi phones, and kludgy hardware workarounds that require you to either stay within Bluetooth range of your PC or get a second phone with free incoming calls. For anything but expensive international calls, the savings seem hardly worth the effort.

In the short term, though, most people aren't going to see Skype on a cell phone, let alone use it. There are technical issues: processors in phones aren't powerful enough for VoIP, and even 3G networks have too much latency and not enough bandwidth in most cases. But more pressing are the financial issues: a cell phone company will never sell you a phone — which they've subsidized — that allows users an easy way to make free calls. And, of course, the fact remains that for most people, charges for cellular data remain so high that using it to make "free" Skype calls is pretty pointless.

But even if you never intend to use Skype on your mobile phone, that doesn't mean you won't reap some of the benefits. The downward pressure Skype and other VoIP networks is exerting on call costs is forcing cell phone companies to figure out how they can utilize the technology themselves to reduce prices, but still get people to pay a premium to use the wide coverage of the mobile network — a clear advantage over trying to use a patchwork of WiFi hotspots for coverage.

There's a few different ways this will happen. The first is Skype-like free calling to users on the same network, like with Verizon's IN plan, or the free mobile-to-mobile calls on other US carriers. The second is another different way of billing, pioneered by O2's Genion service in Germany. This lets users pick a "home zone" — an area usually defined as that served by a certain cell base station and maybe a few adjacent ones — where they get free or cut-rate calls. Some of O2's German rivals have started their own versions, hoping to offer users an alternative to high landline prices, but offering a cheap, integrated service that's cheap enough so people won't turn to SkypeOut or something similar when they're at home.

In the UK, fixed provider BT has taken the idea of fixed-mobile convergence a step further with its Fusion service. It sells users a DSL connection along with a router and a mobile phone with some special software on it. The phone works as a normal GSM handset outside the home, but when within range, it connects to the router via Bluetooth and sends calls over the DSL line instead of the mobile network, at a lower cost.

BT, being a landline phone company, didn't implement everything perfectly the first time around, but plans to launch with 20 new handsets next year that use WiFi instead of Bluetooth, and it's inevitable that more carriers will offer converged services in 2006. Nokia's recently announced E-series phones feature VoWiFi technology for connecting to corporate wireless PBX systems; consumer devices that connect to home WiFi access points and make calls using the Unlicensed Mobile Access standard aren't far behind.

Will you ever have a Skype mobile phone? That's very doubtful. But there's a good chance there will be a number of devices and services on sale by the end of next year that will go some way towards merging the convenience and coverage of a cell phone with the cheap calls of Skype. The mobile equivalent of free Skype-to-Skype calls is already here, if the person you're calling uses the same cell company as you do. All of the services you'd have to pay for to make Skype a real phone replacement — SkypeIn, voicemail, and so on — are already included in pretty much every phone plan. If mobile carriers can offer cheap calls from home — even just cheap international calls, given the steadily declining price of national calls here in the US — they'll have usurped much of Skype and VoIP's cost advantage.

The idea here is convergence: converging the benefits of fixed and mobile services. While Skype and VoIP may be the disruptive force, the convergence is far more likely to happen on the mobile phone than it is on the Skype service.

Carlo Longino is a writer and analyst that follows the mobile industry. He's co-editor of MobHappy, and also an analyst for Techdirt. He can be reached at carlo@mobhappy.com.